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US to Grant Final Approval to American Airlines-Qantas Joint Venture

US to Grant Final Approval to American Airlines-Qantas Joint Venture
(Abdelrahman-Hassanein/Dreamstime)

Friday, 19 July 2019 07:57 AM

The U.S. Department of Transportation (DOT) is set to grant American Airlines Group Inc and Qantas Airways Ltd final approval to operate a joint venture after a prior effort was rejected in 2016, two people briefed on the matter told Reuters.

The department last month issued an order tentatively approving the joint business agreement and granting antitrust immunity to the airlines covering international service.

An application for a joint venture covering the United States, Australia and New Zealand was rejected in November 2016 by former President Barack Obama's DOT which tentatively concluded after a 17-month review that the venture "would reduce competition and consumer choice."

The deal will allow the airlines to coordinate planning, pricing, sales and frequent flyer programs, with new options and customer service improvements. The two OneWorld alliance carriers are planning up to three new routes within the first two years as well as increased capacity on existing routes, the department has said.

American Airlines and the DOT did not immediately comment Friday, but American CEO Doug Parker said last month "the joint business will also create additional jobs at our respective companies and in the industries we serve."

In June, JetBlue Airways Corp told the DOT that it took no position on the alliance, but said it will "substantially reduce competition in relevant markets and concentrate a huge level of market share and power in the hands of immunized alliances."

It also said the three major global airline alliances - OneWorld, SkyTeam and StarAlliance - will control 86% of the U.S.-Australia market.

U.S. regulators in 2001 approved similar joint venture agreements for United and Air New Zealand Ltd and in 2011 for Delta Air Lines Inc and Virgin Australia.

The U.S. DOT is, however, requiring American and Qantas to perform a self-assessment of the joint venture's impact on competition seven years after it takes effect and report their findings to the government.

Regulators in Australia and New Zealand approved the first application for the joint venture before it was initially rejected by the U.S. DOT.

American and Qantas in February 2018 made a second attempt to gain U.S. regulatory permission under President Donald Trump's administration for a venture that would let them coordinate prices and schedules. They threatened to cancel services if it was rejected and argued it could "unlock" up to $310 million annually in consumer benefits.

The revised application made significant changes, including removing a provision that would have barred either carrier from code-sharing with other carriers. Code-sharing is an arrangement between airlines in which two or more carriers publish and advertise a single flight under their own flight number.

The airlines argued in their 2018 application that the venture would lead to a reduction in fares and higher capacity as a "more viable third competitor," and require other carriers to respond with improvements in quality, schedules and prices.

Qantas said last year the joint venture would allow the two airlines to "significantly improve service" and "stimulate demand."

The airlines said the agreement could generate up to 180,000 new trips between the United States and Australia and New Zealand annually.

© 2019 Thomson/Reuters. All rights reserved.

   
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The U.S. Department of Transportation (DOT) is set on Friday to grant American Airlines Group Inc and Qantas Airways Ltd final approval to operate a joint venture after a prior effort was rejected in 2016, two people briefed on the matter told Reuters.
american airlines, qantas, approval, joint venture
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2019-57-19
Friday, 19 July 2019 07:57 AM
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